What is a Commercial Lease Lawyer?
A lawyer for a commercial lease is a type of real estate lawyer who helps a landlord and tenant navigate a commercial lease agreement. Since commercial lease agreements are more complicated than their residential lease counterparts, many people choose to hire commercial lease lawyers to guide them through the process to make sure the agreements are mutually beneficial.
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What Do Commercial Lease Lawyers Do?
Commercial lease lawyers serve as advisors to landlords and tenants who negotiate commercial lease agreements. They specialize in drafting, analyzing, redlining, and understanding these agreements with a high level of skill. They are useful for tenants and landlords because the complexity of commercial lease agreements is greater than that of residential agreements.
You may be surprised to learn that there are many aspects of a commercial lease that residential leases do not include. For example, in an office space lease, rent is often based not only on the square footage of the property but also how it will be used. In other words, landlords may set rent based on the size of the commercial property and its business use.
Additionally, landlords are not always responsible for maintenance like they typically are in residential situations. Instead, the commercial lease determines who is responsible for these fees.
Some agreements can also determine who pays for property insurance, taxes, and utilities for the space. All of these details are determined in the commercial lease agreement. Some agreements entail that these fees are paid separately from rent and some include them in the monthly rental cost.
Commercial lease lawyers are skilled in these areas and are experts in determining how agreements should be worded. Their goal is to ensure that business owners pay a fair price for the space they operate out of and that there are no surprises for either party once the agreement is finalized.
Here is an overview of which areas commercial lease lawyers help their clients navigate:
Commercial Lease Accuracy
Before a lease agreement is drawn up between a lessor and a lessee, a letter of intent is created. This letter includes vital details about monthly rent, square footage, the length of the lease, termination guidelines, and more.
Even though the LOI is a detailed document, incidences can occur where the lease does not correspond with the information in the lease agreement. Commercial lease lawyers can help match up the promises in the LOI versus the terms of the lease agreements and assist in adjusting if necessary.
Since lease accuracy is vital to a mutually beneficial tenant-landlord relationship, business owners who use commercial lease lawyers are far more likely to have a positive experience.
Use of Rental Property
Since a commercial office space lease is rented with the intent of doing business, the agreement must include information about how the property will be used. This means that if you intend to run a restaurant that also sells merchandise, that needs to be written into the agreement.
Skipping this step is a surefire way to cause trouble between renters and landlords. Since some leases, especially retail leases, base rent partly on the tenant's sales, failing to disclose additional revenue streams could turn into a lawsuit. Commercial lease lawyers can help you make sure you cover all your bases to best protect yourself and your business.
Maintenance Responsibilities
A building lease always contains details about who is responsible for maintenance. Costs associated with maintenance are often paid separately from rent and can include the following:
- Security
- Parking lot maintenance
- Lighting
- Electricity throughout the building
Since maintenance fees in these areas can be costly, the exact expectations must be spelled out plainly in a commercial lease. Commercial lease lawyers specialize in crafting and modifying agreements to do just that.
Out Clauses
Did you know lease agreements can last five years or longer in some cases? When you sign these agreements, landlords usually ask for some type of security against the funds due for these years in case something goes wrong.
This means that if your business fails, you could be held personally liable for these costs. This is true even if you have an LLC meant to separate your business or personal finances.
Out clauses are special terms within a commercial lease that allows businesses to end their lease term early under special, pre-determined circumstances. For instance, landlords may allow tenants to sublet a portion of the building space or appoint a new tenant with the landlord’s approval.
Planning for the future should be a top priority for any business owner. Commercial lease lawyers can help you make sure you’re protected if anything goes awry with your finances.
Check out this article to learn more about what commercial lease lawyers do and how they can help you.
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Types of Commercial Leases
The type of commercial lease you sign determines the extent of what you are personally responsible for paying for. Each lease type includes liabilities for tenants that reduce the risk for the landlord by placing additional obligations on the tenant.
Here are the three types of net leases you should be aware of:
Single Net Lease
Single net leases, also called a net lease, are the most basic types of commercial lease agreements. With a single net lease, tenants are responsible for the following:
- Rent
- Property taxes
Single net leases are the least common type of commercial lease agreement due to the high risk that landlords take on by holding themselves responsible for all other costs involving the rental space.
Double Net Lease
Double net leases are slightly more inclusive than single net leases, but leave much up to the landlord to take care of. When you sign a double net lease, you can expect to be held responsible for these charges:
- Rent
- Property taxes
- Insurance premiums
Double net leases are among the most popular in the commercial space since they offer the most equal distribution of responsibilities.
Triple Net Lease
Triple net leases are by far the most beneficial for the landlord. They involve the lowest amount of lessor responsibility and are usually the most expensive for tenants once all costs are included.
In a triple net lease, these are usually paid for by the tenant:
- Rent
- Property taxes
- Insurance premiums
- Routine maintenance
- Repairs
Since tenants take on a large amount of responsibility in a triple net lease, landlords often opt to charge a lower amount of base rent to compensate.
Here is an article about the differences between single, double, and triple net leases.
Tips to Negotiating a Commercial Lease
How to negotiate a commercial lease can be complicated for those who aren’t familiar with the laws surrounding them. The best way to negotiate a commercial lease is to hire a professional lease lawyer who knows the ins and outs of the system.
Hiring an expert is always the best choice, especially when it comes to your business. Even if you feel like you can negotiate without assistance, it’s best left up to lawyers. Don’t risk getting into a bad business deal by resisting asking for the right help.
Below are some tips to review on how to negotiate a commercial lease:
- Learn about commercial leases. Given the various types of leases with differing tenant-landlord responsibilities, make sure you learn about what they include and what type of lease you’re prepared to sign.
- Think about going long term. Longer term leases are typically viewed my favorable by landlords since they guarantee income over a longer period. If you want to have more leverage during your negotiation, one thing you can do is think about signing a longer-term lease.
- Review the termination clause. A termination clause governs how you will get out of the lease. Make sure you review and fully understand your options before signing. You can also negotiate this clause to become more favorable.
- Ask for favorable clauses. Commercial leases have many different types of clauses to review. Learn about them and see if you can get more favorable terms throughout the contract.
- Have a lawyer help you. Given the financial implications of a commercial lease, we recommend having a lawyer help you review and negotiate to make sure you are put in the best situation possible.
Find out more tips on how to negotiate a commercial lease in this article.
Who Pays Legal Costs for a Commercial Lease?
When legal costs are necessary during a lease term, your commercial lease agreement can help you determine who pays for these costs. Typically, if you need to review a lease given to you, you will be responsible for paying a lawyer to help you review and negotiate. If you’re a new landlord and need a lease drafted, you will need to incur that cost.
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